Dow Manages 8.06 Gain in Slow Pre-Holiday Session : Market Overview
* Recouping from two sessions of losses, Wall Street ended a quiet pre-holiday session with modest gains as buyers trickled in to snap up energy and drug stocks. The Dow Jones industrial average rose 8.06 points to close at 3,386.77.
* Treasury bond prices rose in a slow, shortened trading session after dealers reassessed prospects for the Federal Reserve to lower interest rates.
Stocks
The widely watched average remained in a narrow range for most of the afternoon as brokers headed away early for the long Memorial Day weekend.
Analysts said the market had been due to reverse course after its two-day decline. Investors had sold stocks when the Federal Reserve kept credit steady this week instead of cutting interest rates as many had expected.
“There’s a lift from yesterday’s selloff, but no volume,” said Marshall Acuff, a portfolio strategist at Smith Barney. He said the drug stocks and “the whole oil complex” provided the market with support.
In the broader market, advancing issues outnumbered declines by about 3 to 2 on the New York Stock Exchange.
Big Board volume came to an estimated 146.71 million shares against 184.86 million Thursday.
Among the market highlights:
* Merck added 4 5/8 to 152 5/8 ahead of its stock split. Syntex rose 3/8 to 43 5/8, and SmithKline rose 2 1/4 to 81 1/4.
* Oil stocks also found favor, with Texaco gaining 3/8 to 63 3/4, Chevron jumping 1 3/8 to 69, Exxon climbing 7/8 to 60 1/2, and Mobil rising 7/8 to 63 3/8.
* Among oil service stocks, Baker Hughes added 1 1/8 to 22 5/8, and Schlumberger rose 2 1/2 to 64 7/8. Morgan Stanley upgraded its ratings on both companies. Dresser rose 3/4 to 22 5/8. Smith Barney put it on its buy list.
* Federated Department Stores topped the NYSE actives list, rising 3/4 to 12 5/8. The retailer launched a secondary offering of 40 million shares Thursday, and Salomon Bros. initiated coverage with an “outperform” rating.
* Storage Technology sank 3 3/4 to 33 1/2 after the company said second-quarter results would be below Wall Street’s expectations.
In over-the-counter trading, Autodesk added 1 3/8 to 34 5/8. Prudential Securities and Soundview Financial upgraded their ratings. The NASDAQ composite rose 1.20 to 580.30.
In foreign trading, stocks closed up in Frankfurt and London, but fell in Tokyo.
German stocks were given a strong push by money supply figures that turned out lower than feared. The 30-share DAX average ended at 1,802.96, up 17.48 points, or 1%, on the day.
British shares, hovering uncertainly in positive territory for most of the day, finally stepped decisively higher as Wall Street climbed and stock futures rose. The Financial Times 100-share average ended 13.0 points up at 2,715.0.
Tokyo stocks closed sharply weaker but off their day’s lows. The 225-share Nikkei average was down 470.29 points, or 2.52%, at 18,221.00, but still managed a gain of 146.73 on the week.
Credit
The price of the government’s bellwether 30-year bond rose 3/8 point, or $3.75 per $1,000 in face amount. Its yield, which falls when prices rise, was 7.83%, down from 7.86% late Thursday.
Trading was quiet ahead of the three-day Memorial Day weekend. The Public Securities Assn. recommended a 1 p.m. government securities market close Friday.
Dealers said that while some of Friday’s gains could be attributed to portfolio adjustments ahead of the holiday, most of the advance came on a revival of optimism about interest rates.
On Thursday, prices fell as the bond market was dismayed by a Wall Street Journal article that said the Fed had decided against an immediate interest rate cut.
But Friday, bond traders reassessed the situation and concluded that the Fed might still ease its credit policy to stimulate the economy, said Ray Stone, managing director of Stone & McCarthy Research Associates Inc.
“Now the dust has settled and the shock factor has dissipated, the market feels the Fed may still ease, just not as soon as people had thought,” Stone said.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.625%, down from 3.813% late Thursday.
Currency
The dollar turned mixed in domestic dealings after gaining ground overseas. Trading was light.
Analysts said the dollar posted some gains on the belief the Federal Reserve is holding monetary policy steady, which would rule out a much-anticipated cut in interest rates. Lower interest rates make dollar-denominated securities less valuable.
“There has been a lot of dollar weakness predicated on a Fed ease and widening interest-rate differentials in Europe,” said Michael Malpede, an analyst with Refco Inc. in Chicago.
He said most traders were preoccupied with adjusting their holdings ahead of the Memorial Day weekend.
Other currencies--particularly the Japanese yen and the German mark--appeared to dominate trading. U.S. dealers are looking to the release next week of fresh economic data, including April durable goods orders and weekly jobless claims, to offer some direction to trading.
In New York, the dollar settled at 129.20 Japanese yen, down from 130.35 yen on Thursday, and 1.6160 German marks, up from 1.6155. The British pound closed at $1.816, less expensive than Thursday’s $1.817.
Commodities
Energy futures were mostly higher on the New York Mercantile Exchange, with light, sweet crude gaining on news that OPEC members agreed to maintain the current 22.982 million barrel-a-day output ceiling into the third quarter. Light, sweet crude oil for July delivery settled 4 cents higher at $20.94 a barrel.
The pact could raise oil prices because output would be lower than the organization’s forecast of demand in the third quarter.
Elsewhere, gold and silver prices were modestly higher in light trading on New York’s Commodity Exchange. June gold settled 0.70 cents higher at $338.10 an ounce; May silver was 1.9 cents higher at $4.082 an ounce.
On other markets, livestock and meat futures prices moved higher; grains and soybeans were higher, and short-covering ahead of the holiday weekend also helped cocoa futures rebound slightly from Thursday’s $30 selloff.
